Senate Approves New Limits to Class Action Suits

By J.R. Pegg

WASHINGTON, DC, February 11, 2005 (ENS) – The U.S. Senate handed President George W. Bush a major victory Thursday by passing legislation favored by businesses keen to limit class action lawsuits. Proponents of the bill contend it will reign in frivolous litigation, but critics - including environmentalists - say the legislation imposes unfair restrictions on citizens harmed by corporate wrongdoing.

The bill passed the Senate easily by a vote of 72 to 26 - the 26 lawmakers opposing the bill were all Democrats

The legislation now will go to the House of Representatives, which is expected to swiftly pass the bill and send it to the White House as early as next week.

Bush hailed the Senate’s passage of the bill, which he described as "a strong step forward in our efforts to reform the litigation system and keep America the best place in the world to do business."

The bill requires class-action lawsuits be heard in federal court, rather than in state courts, when more than $5 million is at stake and fewer than one-third of the plaintiffs are from the same state as the primary defendant.


Senate Majority Leader Bill Frist, M.D., a Tennessee Republican, guided the bill through the Senate. (Photo courtesy Office of the Senator)
State courts are seen as more sympathetic to class action suits, which are civil suits brought by more than one person against a common defendant.

Supporters of the measure say the current system encourages lawyers to file frivolous suits and "venue shop" for state courts they know will be sympathetic to their pleas.

The bill also curbs attorney fees in suits that involve "coupon settlements," when plaintiffs receive coupons, such as discounts on products, instead of cash.

Language in the bill calls for lawyers to be paid based on the actual amount of coupons redeemed or time spent on the case, rather than the awarded value of the coupons.

"The bill protects plaintiff’s rights while reigning in rampant abuse of America’s courts," said Senate Majority Leader Bill Frist, a Tennessee Republican. "Today marks a significant first step towards ending these lawsuit abuses that have undermined our legal system and slowed economic growth."

Senate Minority Leader Harry Reid, a Nevada Democrat, called the bill "one of the most unfair, anti-consumer proposals to come before the Senate in years."


Senator Harry Reid of Nevada leads the Senate Democrats. (Photo courtesy Office of the Senator)
Critics say the bill will force plaintiffs to pursue claims through the already overloaded federal court system and contend federal judges will reject valid claims because of ignorance, indifference or confusion over how to apply differing state laws.

Joan Claybrook, president of the nongovernmental advocacy group Public Citizen, said the bill takes away power from the states – a criticism shared by most state attorneys general - and means most class action suits will not be heard in either state or federal courts.

The legislation gives "banks, banks, credit card companies, insurers, HMOs, drug manufacturers and other big corporations a green light to defraud and deceive consumers without fear of being held accountable," she said.

Environmentalists echo those fears and say the bill is unfair to citizens who band together in class action suits to seek damages from corporate polluters who violate state environmental or public health laws.

"It would allow polluters to attempt to remove cases involving toxic spills and other public health and environmental harms from the state courts in which they have been filed, and force them into federal courts that are often many hundreds of miles from where the harm took place," says James Cox, legislative counsel for the nonprofit environmental law firm Earthjustice. "By seeking to deny victims their choice of forum, it rewards the polluters who caused the harm."

Cox’s firm, along with 15 other national environmental groups, sent lawmakers a letter warning that class action suits against manufacturers of the gasoline additive MTBE, which has fouled drinking water in at least 35 states, could be jeopardized by the legislation.

The bill could also force removal to federal court of "mass action" cases not filed as class action suits, according to Earthjustice, such as the recently concluded trial in Alabama state court over PCB contamination by Monsanto and Solutia.

The legislation "would reward polluters by giving them a powerful tool with which to delay cleanup and the payment of medical costs to those they have hurt," Cox said. "And justice delayed is justice denied."

Senator Patrick Leahy, a Vermont Democrat, said the "so-called Class Action Fairness Act falls short of the expectation set by its title."

"It will leave many injured parties who have valid claims with no avenue for relief, and that is anything but fair to the ordinary Americans who look to us to represent them in the United States Senate," Leahy said.

Democrats failed with amendments to exempt actions by state attorneys general and civil rights cases from the bill.

A proposal by California Senator Dianne Feinstein that sought to ensure federal courts could not dismiss cases merely because plaintiffs from too many states were involved also failed.

Despite the failure of her amendment, Feinstein was one of 18 Democrats to vote in favor of the bill.

The legislation "like most, is not perfect," Feinstein told colleagues. "But I believe that it represents the best that can be done to solve what is a real problem in our legal system."